doubt common probability queries

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

doubt common probability queries

Postby deepakkrkanodia » Fri Aug 17, 2012 5:11 pm

sir

plz solve my doubts regarding below 2 question


1. a continuous uniform distribution has the parameters of a=4 and b=10. the F(20) is

a. 0.25
b 0.50
c 1.00

the answer is 1.00. plz tel how it is calculated and also the explanation.

2. portfolio A has safety first ratio of 1.3 with threshold return of 2%. what is the shortfall risk for a threshold return of 2%

a. 9.68%
b. 40.30%
c 90.30%

the answer is 9.68%. in it z table value is taken for 1.3. i cannot understand why z value is used in safety first ratio.
what is the relationship btwn z table and safety first ration. plz explain..


regards

deepak kanodia

Tags:

akshat
Good Student
Posts: 10
Joined: Wed Aug 22, 2012 11:53 am

Re: doubt common probability queries

Postby akshat » Wed Aug 22, 2012 12:06 pm

1. F denotes the cumulative probability function and thus F(20) indicates sum of all probabilities for values of x<=20, since probability values are zero for x<4 and x>10 and the sum of all probabilities for 4<x<10 is 1.00. Thus cdf F(20)= 1.00

2. You are right that z-value would make no sense here. We should have been given the risk value, in order to enable the calculation of return value from the safety ratio formula. Then, we could have calculated shortfall risk using this return and the target rate (2%). But since the risk value is not given, we cannot proceed. The solution given is wrong!

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

Re: doubt common probability queries

Postby deepakkrkanodia » Thu Aug 23, 2012 5:33 pm

mr akshat

thx


regards

deepak kanodia


Return to “CFA Level I”



cron

Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.